Foreword
This is a quick note, which tends to be just off the cuff thoughts/ideas that look at current market situations, and to try to encourage some discussions.
As volatility in the crypto space continues, it appears one man, Sam Bankman-Fried (SBF) is trying to rescue his industry by saving banks first.
As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.
If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.
SBF
Before I posted the quick note on Voyager’s bankruptcy, SBF had already been in touch with various crypto banks, injecting capital so as to prevent a greater meltdown of the crypto ecosystem.
If you have money in crypto, especially if that money is tied up in one of the crypto banks that are in serious trouble and have halted transactions, and especially, especially so if your bank/broker is one of those SBF is looking to save first, then you may just be heaving a sigh of tentative relief. If SBF’s plan works, your losses will likely be dramatically reduced.
As far as I can tell, SBF’s efforts are generally held up as a shining example of the crypto community’s “community-ness”, and generally viewed as a good thing.
Irony
And that is highly ironic.
Recall the premise for the founding of crypto — that central banks were somehow evil for bailing out the financial system, especially during the 2008 Great Financial Crisis.
Nevermind that if central banks had done nothing, there was a good chance that regular folks whose money was caught up in banks stood a very high chance of taking a large financial loss. Nevermind that if the financial system were to shut down, even for just 2 months, those who would be hurt the most would likely be those who are least financially prepared. Nevermind that SBF is basically acting as a central bank for crypto, and doing exactly what a central bank would do in the event of a financial crisis — being the lender of last resort.
The crypto community (then) pointed at the rich who benefited “disproportionately” from the bailouts. Yes, a billionaire probably stood a very good chance of not losing a few hundred million dollars due to the bailouts. But for a billionaire, losing a few hundred million dollars is annoying, maybe even frustrating, but in the overall scheme of things, just a flesh wound. Consider what would happen to a family living paycheck to paycheck, if they lost access to their bank accounts for just 2 months, even if they eventually got back all their money? Would they even be able to keep a roof over their heads and food on the table in those 2 months? For our regular-joe family, even if they only stood to lose a few hundred/thousand of dollars, it would almost certainly be a financial catastrophe.
As many have pointed out over the years, the crypto community essentially seems intent on relearning every facet of financial history all over again… and mostly coming up with the same solutions.
Janky Thoughts 